The natural capital landscape within agriculture

After a brief look at food safety from the view of FAO, we caught up with Laimonas Noreika, Co-Founder and CEO of HeavyFinance, about the natural capital landscape within agriculture and much more

In the view of the Food and Agriculture Organization (FAO), food safety is of utmost importance due to the high number of foodborne illnesses each year, estimated at around 600 million cases.

These illnesses not only pose a threat to human health but also impact economies globally. FAO believes that ensuring food safety is crucial for achieving food security and safeguarding the well-being of individuals. Additionally, it promotes access to domestic, regional, and international markets.

To strengthen food safety systems, national, regional, and international efforts are needed, FAO state. This includes improving regulatory capacities for food control, facilitating global trade, and developing institutional and individual capabilities. It is also essential to have effective mechanisms in place for managing food safety emergencies.

According to the FAO, science-based food safety governance is essential for making informed decisions and establishing sound food safety policies. This involves relying on expert bodies like JECFA and JEMRA to provide scientific advice for setting food safety standards. Such governance supports efforts at national, regional, and international levels.

FAO tells us that improving food safety along food chains is vital to preventing diseases and trade disruptions. Supporting developing countries in implementing risk-based food safety management and complying with Codex texts is essential. Factors such as national and local production systems must be considered to ensure food safety.

Food safety platforms and communication play a significant role in networking, dialogue, and global access to information. They facilitate effective communication internationally and address key food safety issues. The FAO say these platforms also collect, analyse, and communicate food chain intelligence to ensure the safety of the global food supply.

The FAO, therefore, plays a crucial role in ensuring global food safety and quality through the development of global standards and regulations, for example. FAO also aims to protect consumers from foodborne illnesses and ensure the availability of safe and nutritious food.

However, numerous challenges exist in achieving this goal, such as inadequate infrastructure and the need for more awareness. Nevertheless, with future initiatives and innovations, FAO strives towards a safer and healthier food system for all. (1)

How advanced is the natural capital landscape within agriculture?

Conventional agriculture is the most significant contributor to the shortage of natural capital that provokes land use change and contributes to the degradation of it. The acceleration of climate change has heightened human awareness of the vital role that natural capital plays in our daily lives on the planet.

Agriculture remains the primary source of our food supply, and the thin 10-15 cm top layer of soil is the crucial tool used in its production. By comprehending natural cycles, we can alter agriculture’s impact on degradation and contribute to climate change mitigation and the resilience of the food supply chain.

Agriculture plays a significant role due to its direct impact on the land and the considerable effect on downstream industries. Farmers are already profitably following several on-farm possibilities to address these issues, such as regenerative and precision agriculture, agroforestry, water-efficient agriculture, or natural fertiliser alternatives.

Still, due to the downstream sectors’ influence, any significant change would need permanent behavioural and operational changes from players, starting from end buyers to food industries.

Natural capital is the critical resource of the 21st century, and our future prosperity heavily depends on the land-use decisions we make. The Global Environment Facility estimates an annual biodiversity finance gap of $300 billion to $400 billion. This highlights the need for increased investments in biodiversity conservation, habitat restoration, and the protection of endangered species.

In 2014, a senior UN official shared that there are only 60 harvests left before the world’s topsoil is degraded to the level of not being suitable for agriculture. Looking from today’s perspective, I have much more hope for humanity. I see many positive changes in creating climate-friendly legislation and shifting to sustainable soil management practices to save our planet. We already have standards and data collection capabilities that play a vital role in understanding and improving natural capital.

I can’t stress enough the importance of small and medium farmers in the combat against climate change. Considering improvements in agriculture, the adoption of conservational soil management practices has been on the rise in Europe and the UK.

Over the past couple of years, I visited many grain farmers in Central and Eastern Europe, and most of them have been using organic fertilisers in at least part of their fields. Crop rotation and cover crops also gained popularity, as farmers took the scientific insights about the benefits of storing more organic carbon in the soil very seriously.

What is activity like around biodiversity and investments in agriculture?

According to the World Bank, sustainable agriculture requires an annual investment of $80 billion to meet the global demand for food by 2050 while reducing environmental impacts.

We foresee that investments in sustainable agriculture will be heavily facilitated by corporations interested in offsetting their CO2 emissions, either by buying Carbon Credits directly in the voluntary market or financing the change to sustainable practices and earning as compensation the Carbon Credits sequestrated by no-till soil management practices.

Simultaneously, the discussed methods will be instrumental in preserving biodiversity.

Due to rigorous carbon sequestration measuring methodologies for agriculture, additionality, and long-term impact, corporations and institutional investors favour soil carbon credits. We estimate a significant price and volume increase in soil credits in the next ten years.

By building an extra revenue stream for farmers, carbon credits also increased the interest in the sector from investors in debt capital.

Besides being a project proponent generating carbon credits, we are also originating medium-term collateralised green loans for small and medium-sized European farms, and we see increased interest from institutional investors with tickets of €30- 100 million.

Agriculture: What are the challenges?

Some primary challenges come from the need for more standardised agricultural investment products for institutional investors.

I believe that the EU made a significant and bold move implementing Article 9 dark green funds, but I’m concerned to see all the scepticism over it coming from the largest fund managers. Complying with the criteria of Article 9 SFDR is challenging, and there could be more clarity from the EU, but climate change is an emergency, and we must act rapidly.

Another challenge is the persistent low liquidity of the voluntary carbon credits. The lack of standardisation in the voluntary carbon market raises uncertainty about the price and liquidity of a carbon credit.

While according to Bloomberg, the long-term cost is estimated to go higher

SDGs, Targets, and Indicators

SDGs Addressed or Connected to the Issues Highlighted in the Article:

• SDG 2: Zero Hunger
• SDG 3: Good Health and Well-being
• SDG 8: Decent Work and Economic Growth
• SDG 12: Responsible Consumption and Production
• SDG 13: Climate Action
• SDG 15: Life on Land

Specific Targets Under Those SDGs Based on the Article’s Content:

• SDG 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious, and sufficient food all year round.
• SDG 2.4: By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding, and other disasters, and that progressively improve land and soil quality.
• SDG 3.9: By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water, and soil pollution and contamination.
• SDG 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourage the formalization and growth of micro-, small-, and medium-sized enterprises, including through access to financial services.
• SDG 12.3: By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses.
• SDG 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning.
• SDG 15.3: By 2030, combat desertification, restore degraded land and soil, including land affected by desertification, drought, and floods, and strive to achieve a land degradation-neutral world.

Indicators Mentioned or Implied in the Article:

• Number of foodborne illnesses
• Regulatory capacities for food control
• Global trade facilitation
• Number of effective mechanisms for managing food safety emergencies
• Presence of science-based food safety governance
• Improvement in food safety along food chains
• Implementation of risk-based food safety management
• Compliance with Codex texts
• Existence of food safety platforms and communication networks
• Collection, analysis, and communication of food chain intelligence
• Development of global standards and regulations for food safety and quality
• Availability of safe and nutritious food
• Adoption of sustainable soil management practices
• Investment in biodiversity conservation and habitat restoration
• Number of harvests left before topsoil degradation reaches unsustainable levels
• Investment in sustainable agriculture to meet global food demand
• Investment in natural resources for emission removals and resilient food supply chain
• Adoption of sustainable farming practices and regenerative land management
• Restoration of natural capital

Table: SDGs, Targets, and Indicators